D.C.'s search is on for Walter Reed master developer (Washington Business Journal)

Washington Business Journal
(1/31/2013 6:00 AM, Michael Neibauer)

The District has launched its search for a master developer to lead the transformation of Walter Reed from an historic Army medical center into a 67 acre, $640 million community of homes, retail, office and institutional uses.

The search process has started with the release of a request for qualifications for teams of potential developers who will not only construct a new community out of Walter Reed, but finance the work and actively market the site to destination retail anchors and corporate tenants.

The chosen team, according to the RFQ, will have the capacity and experience to acquire the site from the District and handle all aspects of the development — planning, design, entitlements, financing, permitting, construction, community engagement, sales and leasing and ongoing management. It must have a "demonstrated record of accomplishment" and "must understand development in the District and the unique aspects of redeveloping a former military facility."

"At this point we're just looking at qualifications," Martine Combal, director of the Walter Reed Local Redevelopment Authority, said of the RFQ.

Herb Miller, chairman of Western Development Corp., is reportedly interested in developing Walter Reed. Ernie Jarvis, president of the D.C. Building Industry Association and senior vice president of First Potomac Realty Trust, said he's heard from several others, though he declined to name them. They're all well known and well financed, he said, given the bidding process alone may cost them millions of dollars.

"I think you'll get a lot of interest from the development community on this," said Jarvis, who raised his family near Walter Reed. "It's an underserved retail market. And it's very rare that you get a swath of land, call it a clean palette that you can design a mixed-use project around in the District of Columbia."

A shortlist of prequalified teams that respond to the RFQ by the March 15 deadline will be asked to tighten up their proposals and respond to a request for proposals by June. The District expects to select a winning developer by July and quickly start negotiations on the terms of a long term ground lease.

Of the 110 acres that comprise Walter Reed, which was closed as part of the 2005 Base Realignment and Closure process, D.C. is expected to receive 66.57 acres and the State Department 43.53 acres for a Foreign Missions Center. The District's site is bounded by Georgia Avenue to the east, Aspen Street to the south and Fern Street to the north and the interior of the campus to the west.

The District's reuse plan for Walter Reed, approved last summer, proposes 90 townhomes, 1,864 apartments or condominiums, 767,000 square feet of office, 212,000 square feet of retail and 176,400 square feet of "other" uses, such as arts and entertainment.

The original brick hospital building will remain, likely for an institutional user, while the 2.6 million-square-foot concrete hospital will come down.

The project will be phased, with the initial efforts focused on residential, followed by office and retail development over the next 20 years.

The site is served by eight Metrobus lines but not Metro, though there is the potential for a Georgia Avenue streetcar line. A study of a north-study streetcar route connecting the Silver Spring or Takoma Metro stations with the Southwest Waterfront is expected to launch this summer.

"Thus far we've had an incredibly robust planning process, but we still have a vacant parcel," said D.C. Councilwoman Muriel Bowser, who represents Walter Reed as the Ward 4 council member and chairs the economic development committee. "We need to get going."

The Walter Reed redevelopment is progressing on multiple fronts. In addition to its master developer search, D.C. is coordinating with the Department of Housing and Urban Development to win approval for the District's reuse plan, while negotiating with the Army on the disposition price for the property.

At this point, Combal said, the District has no idea what the fair market value of the property will be, or how it will pay for the land. That estimate will not be available until after a market study is updated, the existing campus buildings — those that will remain — are assessed and a capital improvement plan is created. The Army, of course, will do the same kind of appraisal work to develop its own estimate.

The two are likely to be quite different, D.C. officials say, due in large part to differences in the cost of building new infrastructure into the campus, such as utilities and roads.

There is no money budgeted for the Walter Reed acquisition or for its infrastructure — where the city's five year capital improvement program includes $113 million for St. Elizabeths east and $48 million for McMillan. The latest CIP provided only $1 million for Walter Reed planning.

While the master developer will play a role in the Army negotiations, Combal said the District "will always be the lead."